Telecoms outsourcing for innovation: lessons from other verticals
22 October 2012 | Guy Matthews
Telecommunications is not the only sector where outsourcing is a vital weapon in a tough competitive landscape. What other industries are showing carriers the way forward in the outsourcing space?
Carriers have long realised the dividends of outsourcing non-core business processes to other parties in order to focus on what they do best.
They will sometimes look for partnerships with other carriers to achieve this, sometimes to specialists outside the industry with niche expertise that would make no sense for the carrier to acquire for themselves. Few telcos run their own payroll function, for example.
Most carriers would flatter themselves that the management and meeting of customer expectations is an area they are adept at administering themselves, or at any rate one where they are already outsourcing to best effect.
Not always so, believes Jonathan Wright, VP service provider with European network operator Interoute: “There are many other verticals out there where outsourcing is prevalent that have much better control over the customer and over satisfying those customers’ needs,” he claims. “Telecoms is probably at least five years behind these industries and has a lot of catching up to do.”
Lesson 1: Data analysis
The truly intelligent and dynamic analysis of customer data, as near to real time as possible, is certainly in its relative infancy in telecoms, whereas other sectors, like retail and financial services, have successfully been seeking partnerships to achieve this for many years.
Both banks and retailers generate, as a by-product of their mainstream operations, a torrent of rich transactional data. Many have turned to outside experts to apply algorithms to that data that can, for example, be tuned to spot unusual customer behaviour.
By breaking data into threads, data management specialists can identify patterns of activity that might either suggest criminal activity in progress, or perhaps just changing customer habits – information that then can be exploited commercially.
In a similar way, a telecoms carrier or service provider might be able to identify unusual traffic patterns and respond to them more quickly than rivals, creating competitive advantage they could never realise on their own.
Although carriers retain vast quantities of customer data, they are often blind to its significance because they do not keep in-house the ability to store it dynamically. By outsourcing the analysis of that data to the right partner, one for which data is its sole business, that information can be split between tiers and examined for its predictive capabilities.
Proper analysis of data can also be used to shorten the time lag when developing new products and services to respond to changing customer requirements. No longer need it take months for a new service to emerge. The right partner, such as a bank might use to help launch a new mortgage offer, can reduce this lag to weeks or even days. In a particularly fast moving area of the communications industry, such as mobile telephony, sophisticated analysis of data can help to blend the most appealing mix of content or the right roaming deal.
Retailers use data analysis expertise not just to look for meaning in already harvested data, but to look into the future and anticipate the next wave of customer behaviour. They can do this by looking across hundreds of different brands and product lines and converging that information onto a single database. Online retailers in particular have become skilled at spotting consumer trends almost before the consumer themselves knows what they want.
Lesson 2: Keep track of the competition
Carriers may well be mindful of the superior data agility of new types of rival, for example ‘over-the-top’ service providers such as Skype and Google. Do these players have lessons for the traditional carriers? Have they developed customer relationship management techniques that telcos might do well to invest in?
The right partner might help the traditional carrier to exploit strengths that the OTTs don’t possess. An old school telco probably has closer dialogue with the customer than a Skype, and will certainly have value embedded in their network assets that an infrastructure-lite rival can’t imitate.
Other types of rival, like utility companies breaking into the communications market, are already using partners to develop new ways of managing infrastructure cost effectively that telcos could potentially copy.
So-called smart grid technology is used by energy companies, as well as those in oil and gas exploration, to automatically evaluate events across their real estate in near real time. They are deploying software to look for patterns and foresee unwanted events. Communications network operators too could predict network failures before they occur, by leveraging similar technology.
Lesson 3: Plan for the future
Alam Gill, SVP for international managed services at CSG International, an outsourcing company that works with many well know carrier names, says that not only are there many other sectors that are more outsourced than telecoms, they are less dependent on creating new solutions to problems for which a solution already exists.
“There’s a history of carriers building and owning their own solutions whereas, say, financial services looks at a more generic architecture, less bespoked than in telecoms,” he says. “Telcos have their own people manage things, while outsourcing the odd component.”
He says this can cause issues when telcos want to roll out something new like LTE: “Some are finding it pays to use more outsourcing to help with that,” he says. “There’s no one sector that knows how to break into new service areas perfectly, but if you do want to be global about it then it does pay to take a generic global approach. Telcos have global branding, but behind the scenes still operate individual stacks of technology.”
There are of course other vertical sectors which have a demonstrable lead over telecoms in outsourcing, but in a way that telcos cannot necessarily emulate with ease.
The car industry is probably the most sophisticated user of outsourcing in the world, and has been very successful at it for a number of years, believes Andreas Hipp, CEO of global carrier’s carrier Epsilon: “It’s all about the manufacturing process which in turn is all about components,” he says. Telecoms on the other hand is a lot more fast changing, and is about services not components.”
Every customer wants a telecoms service that’s a little bit different to the next customer, in a way that a production line approach can’t help with, he believes: “Yes, telecoms can develop in its use of outsourcing, but it should be careful about trying too much too quickly,” he warns.
“One reason is that some areas of telecoms have low barriers to entry. You can suddenly get dozens of new competitors in a market area, only some of which know what they are doing but all of which can put pressure on pricing. This can make it difficult to formulate an outsourcing strategy. In car manufacturing, you can predict more easily how the market will behave and outsource accordingly.”
Andreas Kederer, director of product management for managed services with Colt, says if you want to see outsourcing raise to a fine art, then you need to look at how outsourcers do it themselves: “It’s interesting to see how systems integrators and consulting firms handle the outsourcing of business processes,” he says. “They are looking to do so on a shorter and shorter cycle. Perhaps telecoms is less amenable to this greater flexibility because of its far larger asset base.”
Each vertical will have unique requirements and adoption rates when it comes to outsourcing, just as we are seeing different adoption rates in other areas like cloud and infrastructure as a service (IaaS).
Each sector sees different value, even in the same sort of solution. But helping to understand where value has been achieved by others could well add important clarity to the next wave of telecoms outsourcing.
How telecoms companies are influencing the outsourcing strategy of other industries
If there’s much that telcos can learn from other sectors, are there not lessons that others can take from areas that have been pioneered by the communications industry?
Finance, education and healthcare are all verticals with needs that overlap with those of telecoms, and where telecoms companies with a managed services offer are already finding a ready audience in areas like the management of widely networked and distributed operations, says Mary Stanhope, vice president of marketing with Global Capacity, which operates an automated exchange platform for telecoms service providers: “All three of these verticals put a premium on high capacity and throughput, reliability, quality of service, security and value communications as a core part of their overall success,” she says, values where she believes carriers have a considerable track record.
Len Padilla, NTT Europe’s senior director of technology, says he is seeing many verticals where companies are taking advantage of pioneering developments in the deployment of on-demand solutions as shown by communications service providers. He believes they can copy the economies of scale that cloud offers to develop new commercial models for themselves, with help from telco partners.
“We’ve got a customer in the airline industry,” he explains. “Their IT management was having a tough time explaining the benefits of taking business online to other C-level executives. We helped them answer the questions those C-levels had.”
“We identified a new commercial model where they could split their ticketing operation into two. One side was the static side of the business where costs are broadly always in line with benefits. The other is what you might call the more dynamic side of the business, the less predictable side of their revenue.”
He said NTT Europe leveraged its own experience to suggest they put the more dynamic side of the business in the cloud, opening the door to a more interesting, and a more controllable, commercial model: “In this way you can, as a middle sized enterprise, start to enjoy some of the benefits that used to be the preserve of the very biggest organisations,” he believes.
21 June 2018 |
21 June 2018 |
20 June 2018 |